Fiscal Studies: One out of three IL districts will either lose money or see no net gain in state aid

After the Civil War, near the time this picture was taken, the legislature authorized townships to establish schools. Nearly a century and a half later, support for Illinois' system of public education remains primarily the responsibility of local voters through property taxes. As a result, educational opportunity for Illinois schoolchildren continues to be largely a function of where they live.

Something historic happened in Decatur last February. For the first time in more than 40 years, voters approved a tax increase for the city's cash-strapped public schools. But even that imminent infusion of new property tax dollars wasn't enough to stop the flow of red ink. The district is pressing ahead with $7.2 million in budget cuts, including the fall layoffs of 140 teachers.

Nearby, the Springfield school system is struggling with its own financial problems. By 2002, the district could face a $17 million deficit brought on by flat state funding and tax caps, which have slowed the influx of property tax dollars. To cope, those school officials have recommended $5 million in cuts, including about 50 teachers and administrators. A referendum could materialize within the next year.

These dilemmas have worsened amid unparalleled prosperity, and despite a landmark three-year school funding program launched in 1997 by former Gov. Jim Edgar that guaranteed a rising level of spending for each public school student. Steps by Edgar's successor, Gov. George Ryan, to channel 51 percent of new state revenues into education in each of the past two years haven't helped either.

"Decatur and Springfield aren't East St. Louis. They aren't Chicago. They're pretty solid types of districts, and yet they're in debt. Now something isn't right there," says former state school Superintendent Robert Leininger, who chairs a special panel that wants to equalize spending between rich and poor school districts by overhauling the state school aid formula.

But not now.

Despite vexing financial troubles, neither of those downstate school systems holds out hope of prying more dollars from the General Assembly this spring when the divisive school spending issue re-emerges with the expiration of Edgar's funding package. The reason for the pessimism rests in the fine print of a modestly crafted school spending plan laid out in January by Leininger's group, which Ryan empaneled last summer. The $165 million the group wants to pump into the state aid formula in next year's budget will mean more money to about 600 school districts. But one out of three districts will either lose money or see no net gain - among them, Springfield and Decatur.

Even the outspoken former schools chief describes the steps the group is touting as little more than a Band-Aid to be applied until a major overhaul of the often-maligned state aid formula can be considered in early 2003. But if lawmakers do no more than adopt the short-term plan Leininger and Ryan embrace, few believe the wounds of education disparity will be healed this spring.

"It's tread the water, finger in the dike, get through another year," Leininger says of his panel's recommendations. "It'll help ease the pain if there's a factory closing down. I don't think this package will be disequalizing, but we're not professing, nor do we want to sell this on the basis that this will bring back equity. Because it won't.... This is just our first step toward a very comprehensive package."

The cornerstone of the commission's proposal is a $135 increase in the minimum amount the state allots per child, raising the so-called "foundation level" created by Edgar to $4,560 per student. In each of the past three years, that level has grown by $100. The panel also wants lawmakers to expand eligibility for grants to districts with high concentrations of low-income students. And finally, the commission has advised continuing payments known as "hold harmless" grants for at least one more year. Those funds ensure that school districts with declining enrollments won't see state aid dip below 1997-98 levels.

"On the surface, these look good," Decatur School Board President Jacqueline Goetter says of the proposals. "But when you get down to specific school districts and what they'll receive, we'll see very little change. Those recommendations, quite frankly, aren't going to help. Decatur is one of several school districts that will find themselves in the same situation. The state has to do something else about the formula."

The aid formula has long been a sore point for school districts throughout the state and, for a quarter century, a source of intense geographic rivalry. It rewards school systems with rising enrollments, high concentrations of poor students or an insufficient property tax base to adequately fund their schools. For years, it has deepened reliance on the property tax, creating an ever-widening gap between educational haves and have-nots.

The Leininger panel intends to continue studying the disparities in Illinois' system of school finance and, ultimately, recommend ways to overhaul the state aid formula, most likely by placing a greater emphasis on revenue sources other than property taxes.

Leininger says an income tax increase undoubtedly will be among the solutions under consideration as talks go into next year and beyond, though the panel made up of lawmakers, business leaders, teachers' unions and educators is far from a consensus on that point. Such a political bombshell was avoided this year because the panel - created under the 1997 Edgar school funding plan - was seated only last summer.

And, in the unsettled political climate of next year, no one expects substantive discussion on possible tax hikes until after the gubernatorial election in November 2002.

"I don't think there's an alternative when they didn't get going until late last summer," Edgar says of the modest steps advocated by the group this spring. "Under statute, they should have set [the panel] up a little earlier. At this point, I don't know what alternative they have now if they haven't really done a study and don't have all of the players agreeing on a direction. I don't think in the next few weeks you can redo the school aid formula."

While there seems to be general support for the baby steps being proposed, there are several other issues that could become entangled with the funding question this spring. Among them are efforts to expand state testing, downsize the State Board of Education, channel up to $12 million to parochial school systems and pump state money into Chicago's teacher pension system. There also is the question of whether there should be a continuing appropriation of state funds for schools beyond the upcoming fiscal year, the key to Edgar's funding plan and an approach that Gov. Ryan has rejected. And finally, the tightening state budget could create funding pressures that force the governor to scale back on his promise to devote 51 percent of new revenues to education, leaving the Leininger package in question.

"I think it could be in jeopardy during this budget-making session," Democratic House Speaker Michael Madigan says of Ryan's pledge. "Every time that a dollar is received by the state treasury, only 49 cents is available for everything else."

Madigan, and the teachers' unions, also are less than enamored with the subject of expanded state testing of children.

But the economy and Democratic lawmakers aren't the only potential stumbling blocks to Ryan's pledge. "I don't mind giving them 51 percent," Republican Senate President James "Pate" Philip says, "but I want to see some results." This push for accountability is part of a national GOP agenda and has been embraced by President George W. Bush - and now Ryan.

Indeed, the state board has advocated a yearly reading and math test for students in grades three through 11 beginning in the 2004-2005 school year. That would be an expansion on the state reading and math tests that are administered for third-, fifth- and eighth-graders. State tests on science and social science are given in the fourth and seventh grades. The additional testing would cost an estimated $20 million.

Still, Sen. Dan Cronin, an Elmhurst Republican and chairman of the Senate Education Committee, sees little choice but to give the governor the education dollars he wants. "I think we've got to back him up on it," he says of the pledge. "The commitment was made. I believe we should follow through on it. If we back off 51 percent, it will only fuel debate from those who want to raise the income tax, and I don't want to go down that path at this point."

Aides to Ryan insist the governor is committed to keeping his promise and seeing the first stage of the Leininger recommendations implemented. "The governor's goal is clear, and that is to increase the investment per student in school districts across the state," says Ryan spokesman Dennis Culloton.

But clearly, if the Leininger package becomes law, that investment won't be uniform. An analysis by the State Board of Education found winners and losers under the plan. Of 961 school districts in the state, 607 would see a net gain in funds if the Leininger recommendations are adopted. But 236 districts would see no change in their level of state funding, and 118 would see a net loss. (Those estimates are preliminary, based on district projections given to the state board. Totals could fluctuate when final enrollment figures and property values are reported to the state in August.)

No Surprise, the biggest financial winner under Leininger's proposal is Chicago. This year, the state's largest district will get $725.8 million in state aid. Under the new proposal, that amount would increase to $788.6 million, for a net gain of almost $63 million. A boost in enrollment, coupled with the $135 increase proposed for the foundation level, accounts for much of the probable increase. The district also will benefit through enhanced poverty grants.

City schools Chief Executive Officer Paul Vallas, a member of the Leininger panel, says he is satisfied with the level of state funding recommended for Chicago's schools next year. However, Vallas wants to cut a side deal with lawmakers by convincing them to begin pumping money into the Chicago system's teacher pension fund, just as the state does for the pension fund of downstate and suburban teachers. He also believes Ryan should devote a third of the state's share of national tobacco settlement proceeds to school health programs. Both steps would enable the city school system to free up money to build or expand approximately 50 schools and fund expanded programming.

"I need some help. I'm not a miracle worker. We're not a rich district," Vallas says. "We're working hard to improve things. We're not asking for anything the state can't afford, nothing that other school districts aren't getting, and we're not asking for anything we don't deserve."

Conversely, the biggest loser under Leininger's package is Carol Stream Elementary District 93. Once one of the fastest-growing in the state, the DuPage County district's enrollment has leveled off, but property values continue to rise steeply. As a result, state aid is shrinking and will drop by $1.4 million under the Leininger panel's recommendations. Like other suburban districts, Carol Stream can't completely cash in on its rising property values because of tax caps that limit the size of its annual tax levy to 5 percent or the rate of inflation, whichever is greater.

Confronted with the state board's estimates. District 93 Superintendent Hank Gmitro says, "We'd definitely have to look at our expenditures and see where we could reduce them. In an educational system, that means services to children. I don't know what they'd be. But you're not going to make up that loss of revenue through just minor kinds of reductions."

Financial pains districts have to go through aren't calibrated to the state's fiscal calendar. Until a more comprehensive fix is made at the state level to lessen local reliance on the property tax to fund schools, some members of the General Assembly predict more cash crises like those faced by the Springfield, Decatur or, potentially, Carol Stream districts. And requiring those districts to adhere to rigorous new accountability standards, like the increased student testing Ryan and others have proposed, won't help matters either, some say.

"You'll see more school districts like Decatur who are going into the red, who are facing budget deficit problems and who have to go back to the only source they have and say, 'We have to increase your property taxes one more time,'" says Rep. Julie Curry, a Democrat from Mt. Zion who chairs the House Appropriations Committee-Elementary and Secondary Education.

"We've got school districts all over Illinois who are suffering because of our lack of effort to resolve this issue. While accountability is always high on my list, so is providing adequate dollars so these school districts can educate our children in a way that's fair and equitable. That's not happening now."

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